Tesla CEO Elon Musk attends the Breakthrough Prize awards in Los Angeles on Saturday. He laid off thousands of Tesla employees the next day. Photo: Mario Anzuoni (Reuters)
Elon Musk’s Tesla has had a rough start to the year .
Tesla stock has fallen about 37% so far in 2024, making Tesla one of the worst performers in the S&P 500 , only matched by Boeing and insurance company Globe Life — the later of which is being targeted by short-sellers and has dropped 54%.
The Austin, Texas-based electric vehicle maker’s sales have taken a dive , while production has been slammed by unexpected factory shutdowns and planned renovations. It’s facing rising competition in China from local automakers and more legal action in the U.S. And t he ever-distracted Musk isn’t making things easier on his EV company.
Tesla’s “nightmare” of a first quarter , as Wedbush analyst Dan Ives described it, was followed by a sweeping round of layoffs this week , which impacted at least 14,000 employees across almost every division.
“[W]e have done a thorough review of the organization and made the difficult decision to reduce our headcount by more than 10% globally,” Musk told staff Sunday night . “There is nothing I hate more, but it must be done. This will enable us to be lean, innovative and hungry for the next growth phase cycle.”
Here’s where it all went wrong.
Photo: Gonzalo Fuentes (Reuters)
In January, a Delaware state court judge struck down Musk’s $56 billion Tesla CEO pay package from 2018 that cemented his place as the world’s richest person . The plan was the largest executive compensation package in history.
Judge Kathaleen McCormick found that defendants in a lawsuit, which included Musk and Tesla’s board, failed to meet the burden in proving that “the compensation plan was fair.” McCormick added that the “process leading to the approval of Musk’s compensation plan was deeply flawed.”
The ruling infuriated Musk , who declared that Tesla shareholders would vote on whether to change the state where the company is incorporated from Delaware to Texas. SpaceX, his aerospace company , filed to reincorporate its business in Texas in February.
Earlier in January, Musk had said he wanted more control over Tesla and suggested he would build artificial intelligence and robotics products elsewhere unless he got what he wanted. Musk founded xAI last July to compete with big names like OpenAI and Google on artificial intelligence technology.
“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” Musk said on his social media platform X on Jan. 15. “Enough to be influential, but not so much that I can’t be overturned. Unless that is the case, I would prefer to build products outside of Tesla.”
Musk’s comments also worried some investors who were already concerned about succession plans at Tesla. Musk has held the CEO title since 2008 and several potential replacements have left the company in recent years. In total, Musk leads seven companies.
Photo: Sean Gallup (Getty Images)
Photo: Florence Lo (Reuters)
Like many foreign automakers , Tesla is finding it tougher to compete in China, as local rivals accelerate their electric vehicle plans and sales begin to slow.
China’s first-quarter sales hit 1.03 million EVs, growing 14.7% compared to a year prior, according to data from the Chinese Passenger Car Association. But that’s the slowest quarterly growth since the second quarter of 2023.
Tesla was the second biggest seller of EVs last month, with 89,064 made-in-China units sold, according to the China Passenger Car Association, up from 60,365 EVs in February . China’s largest EV company, BYD, sold 301,631 units.
Overall, BYD sold 300,114 new-energy vehicles between January and March, while Tesla delivered 386,819 units . Despite being beaten out in terms of number of cars delivered, BYD sales grew 13% year-over-year, while Tesla’s deliveries dropped 8.5% .
Automakers in China have been trapped in a price war led by BYD, which has introduced or teased several new models across its brands, such as the $233,000 Yangwang U9 electric supercar and a planned electric pickup truck . It’s also refreshed several models , including the ultra-cheap e2 and Seagull electric hatchbacks.
The Shenzhen-based carmaker is also rolling out its first electric pickup truck later this year in a direct challenge to Tesla’s Cybertruck and Ford Motor Co.’s F-150 Lightning.
And Xiaomi, a Chinese smartphone company, has beat Apple into the EV market. Xiaomi’s first-ever EV, the SU7, has been met with extreme enthusiasm by consumers in China.
Xiaomi CEO Lei Jun said the SU7 outperforms Tesla’s Model 3 compact in all but two areas. The SU7 costs 215,900 yuan ($29,900), or about $4,000 less than the 245,900 yuan ($34,020) Model 3 in China.
Tesla has also told workers at Gigafactory Shanghai to lower Model Y and Model 3 production and work five days a week instead of six-and-a-half days. Some production lines, including battery workshops, have been put under longer suspensions, and suppliers have been told to prepare for extended production limits through April.
Photo: Justin Sullivan (Getty Images)
Tesla disappointed investors and Wall Street when it reported a major decrease in electric vehicle sales and a more minor dip in production in early April.
The automaker said it delivered 386,810 electric vehicles over the first three months of 2024. That fell wildly short of Wall Street’s expectations and sent Tesla stock down 5%, capping off a rough quarter already marked by controversy and heightened competition abroad.
Tesla sold 369,784 Model 3 compact cars and Model Y SUVs between January and March, and 17,027 other EVs. Although the automaker does not provide a breakout for those deliveries, they include the Model X crossover SUV, Model S sedan, and the Tesla Cybertruck , an electric pickup released by Tesla last November.
Overall, that’s an 8.5% decline compared to a year earlier and a 10% decline for Model 3 and Model Y sales. It’s Tesla’s first year-over-year decline since the second quarter of 2020, when the COVID-19 pandemic was in its early stages .
In a note to investors shortly after the drop in deliveries was reported, Deutsche Bank analysts said that the difference between the number of EVs built and the number of cars sold — about 46,500 units — “confirms that beyond the known production bottleneck, there may also be a serious demand issue.”
Graphic: metamorworks (Getty Images)
Musk also made his latest promise to investors and fans — a self-driving Tesla will be unveiled on Aug. 8 , he said. But that’s not the whole story .
California agencies that regulate robotaxis told NBC News that they haven’t heard from Tesla regarding its self-driving vehicle plans or applied for necessary permits. Two other states that regulate autonomous vehicles —Arizona and Nevada — have also not been in touch with Tesla over its robotaxi plans.
Analysts from both Deutsche Bank and Berntein have cast doubt on Musk’s promise , with Bernstein noting that the Aug. 8 announcement is likely “more aspirational.” The Tesla chief has frequently promised new products would arrive on the market months or years ahead of their eventual entrance.
The Cybertruck electric pickup was first revealed in November 2019 with production scheduled for 2021, but its first model wasn’t made until 2023. A second-generation Roadster sports car was unveiled in 2017 and expected to join the market in 2021 — but has since been pushed back to 2025.
Tesla has also made the move to cancel its planned $25,000 electric vehicle , a venture Musk has been talking about since 2006. Reuters reported that Tesla has stopped developing the entry-level electric vehicle in favor of focusing on the robotaxi, although Musk has denied that.
Electrek on Monday confirmed Reuters’ report , citing unnamed sources familiar with the matter. Tesla’s aim to expand its Austin, Texas, factory to work on the new EV has been completely defunded and many workers involved in the project have been laid off, Electrek reports.
“If Tesla were to confirm that its renewed robotaxi focus comes at the expense of Model 2, we believe this would introduce considerably higher risk profile for the stock, and remove a key reason many shareholders currently own it,” Deutsche Bank analysts wrote Tuesday.
Photo: Spencer Platt (Getty Images)
Tesla earlier this month reached a settlement with the family of a driver who died in a 2018 crash involving the use of Tesla’s driver assistance program Autopilot, just days before a trial in California state court was set to kick into gear.
The driver, 38-year-old Apple engineer Walter Huang, was behind the wheel of his Tesla Model X SUV in March 2018 when it crashed into a barrier on a California highway. Tesla’s driver assistance technology, Autopilot, was engaged at the time .
The settlement was instantly celebrated by Tesla’s critics, while supporters were left wondering why the company had so abruptly settled. Musk — a major proponent of Autopilot — has said in the past that Tesla will “never seek victory in a just case against us” and will “never surrender/settle an unjust case against us.”
Tesla is facing several lawsuits in federal and state courts over its driver assistance technology and has been accused of false advertising by California’s Department of Motor Vehicles. It’s also been investigated by the California attorney general’s office over its marketing practices related to Autopilot and its Full Self-Driving software .
The Department of Justice has asked Tesla for documents related to the technologies. And the National Highway Traffic Safety Administration has reviewed 956 crashes where Autopilot was initially reported to be in use and launched more than three dozen investigations into accidents involving the software
Photo: Justin Sullivan (Getty Images)
Two ex-Tesla employees are the latest to file a proposed class-action lawsuit against the company over alleged malpractice at the company’s factory in Fremont, California.
The plaintiffs are Shannon Brown, a material handler, and Tami Okada, a production associate. Both worked at warehouses in Fremont for varying times between 2022 and 2023, according to the lawsuit.
The pair said they “regularly” worked more than eight hours a day and 40 hours per week and were not provided with meal or rest breaks as required by California state law. The plaintiffs say Tesla did not properly compensate them — and other potential class members — for overtime, sick pay, vacation pay, and meal and rest breaks.
Tesla is also accused of failing to reimburse employees for work-related expenses and failing to provide written descriptions of quotas that workers must meet.
The latest accusations come as Tesla is fending off a series of claims related to discrimination and harassment at its facilities, including Fremont. There have been at least a dozen lawsuits against Tesla over allegations of racial discrimination or sexual harassment in recent years.
Tesla is also grappling with claims that notoriously anti-union Musk violated workers’ labor rights in 2018 when he suggested that employees would lose stock options if they organized. The United Auto Workers union has named Tesla as one of its targets as it tries to organize auto factories across the U.S .
Two of Tesla’s highest-profile and public-facing executives resigned from the company Sunday as Musk informed more than 14,000 employees that they’d be losing their jobs .
Andrew Baglino, Tesla’s senior vice president for energy engineering and powertrain, has been with the company since 2006. He was one of the original electrical engineers working on the Roadster, Tesla’s first-ever electric vehicle , and has been a frequent face at investor events. Baglino is also one of Tesla’s four named leadership executives .
“I made the difficult decision to move on from Tesla after 18 years yesterday,” Baglino said in a statement Monday. “I am so thankful to have worked with and learned from the countless incredibly talented people at Tesla over the years.”
Rohan Patel, Tesla’s vice president of public policy and business development, has also left the company . Patel had become a familiar face to Tesla’s hyper-online community, often engaging with investors and customers on Musk’s social media site X as a one-man public relations department .
“The past 8 years at Tesla have been filled with every emotion—but the feeling I have today is utmost gratitude,” Patel wrote Monday, thanking Tesla’s customers, Musk, and his team.
The two men followed the departure of Zachary Kirkhorn, Tesla’s “master of coin” and chief financial officer, who resigned from the company last August . Like Patel and Baglino, Kirkhorn had become a familiar face to Tesla’s online community and investors.
Musk on Sunday cited a “duplication of roles and job functions in certain areas” that sprung up as the company grew, adding that “more than 10%” of employees would be laid off. On Monday, Musk added that Tesla needs to “ reorganize and streamline the company for the next phase of growth ” every five years.
